Defining Legal Insurance
Legal insurance is an optional employee benefit that can help employees avoid and manage the costs of legal services.
Legal insurance is coverage provided to employees and their enrolled dependents designed to offer legal advice, assistance, and representation. Legal insurance does not cover litigation costs or settlements, so it works best alongside a medical insurance or disability insurance policy to insure that someone has access to a lawyer, should the need arise. Like other supplemental insurances offered through employers , legal insurance can help insulate your employees from steep out-of-pocket expenses should legal services be necessary. It can provide assurance to employees that they will have attorney assistance if a legal problem creeps up. Legal insurance is particularly helpful to families that may be less able to reimburse high-cost up-front fees. Legal insurance therefore can be a great way to support all employees, from entry-level up through management. Legal insurance has been growing in popularity as an employee benefit, especially with companies that have high rates of turnover among employees.
Key Advantages of Legal Insurance Provided by Your Employer
Employer-provided legal insurance is a group benefit plan that can help employees handle a number of business as well as personal legal concerns. When making plans for new benefits, employees should also consider this aspect as employees often find using an attorney to be expensive. Here are some advantages that come with such insurance.
You Save Money
Buying group legal plans for employees is usually less expensive in the long run and can be a good alternative to general legal insurance. Employers looking to purchase group legal plans need to do more research as how they offer premium payments and which legal services are covered could influence the total premium. Group legal insurance plans are also generally based on the number of employees covered and their ages, so small business employers may be asked to pay a higher amount per policy.
Legal Insurance Made Convenient
Employers may offer employee legal insurance policies for a number of reasons ranging from saving employees money on legal fees to cutting down on the number of general legal inquiries that attorneys get. Employee legal insurance is designed to help employees take care of many common legal issues that require the help of an attorney without having to spend a lot of money. Employees can simply make use of the covered services offered under the plan, such as making wills, review simple contracts or handling real estate transactions for a small co-pay. Their employers simply need to give them the information regarding the legal firm or companies covered under their employer-provided legal insurance plans.
Group Legal Plans
Employers can either offer individual legal insurance policies to employees as part of their benefits package or group legal plans. Policies that are available include legal spending accounts, prepaid legal plans and group legal services plans. Group legal plans cover a number of legal issues that employees may have, which makes it a convenient services for them.
Typical Legal Matters Covered by Employer-Sponsored Insurance Plans
Employers generally offer legal insurance for common issues that employees and their families face. While the specifics of the plan will depend on the particular provisions in the insurance offered by your employer, there are some legal matters that are covered more frequently than others.
Family law is one of the top legal matters handled under legal insurance through an employer. For many people, they may be reluctant to handle family law issues, especially divorce, contracts, custody agreements and other surcharges that come up during or after the dissolution of a marriage, without the comfort of a lawyer by their side. Having a lawyer to help take care of important details during an already miserable process can increase the chances that you can successfully negotiate a settlement before resorting to an expensive court battle.
Estate planning is another aspect of legal insurance that people appreciate, as the advice of a lawyer while drafting a will or a trust can save your loved ones significant headaches after you pass. Having the right information and guidance can help protect your wealth and ensure that your wishes are carried out in the event of your death.
The most common legal issue covered under these plans is that of real estate. Most insurance companies provide coverage for legal fees associated with the purchase of a primary residence or vacation home, as well as issues regarding the sale of the home. The reason why this benefit is so popular is simply that almost every person needs to deal with real estate in some respect at some point in their lives.
Additional aspects that are sometimes covered under your employer-sponsored plan include instances when you are facing a law suit, whether civil or criminal. While you may not want to get caught under a criminal charge which would require you to retain a lawyer, if the cost is covered through your insurance plan, it may be attractive to have the service of a high quality criminal defense attorney to assist you.
Who Can Get Legal Insurance?
Legal insurance is generally offered as a perk through your employer. However, employers can choose whether to offer it as an option to employees. If you work for a participating company, you will typically be notified that you are eligible to enroll in the plan. As with most forms of supplemental insurance, you must sign up for a policy to get coverage.
Usually, employers will give qualified employees a choice between several different insurance options during open enrollment. Open enrollment is a specified period in which you can select from a range of premade benefits packages. Your employer will notify you that this period is upon you, so be sure to take note of how long the open enrollment lasts, as it may vary from year to year.
Often, you will need no prerequisites at all to enroll in one of these plans. These legal insurance plans are open to all employees of participating companies. However, if you’ve had any previous claims, those may be taken into account when deciding on your premium costs. To avoid making their plan unusable, certain companies require waiting periods for pre-existing conditions or stipulate that coverage is limited to services not currently in progress. Be sure to read the fine print if any of those apply to you.
If your employer chooses not to offer legal insurance but you are still interested, you can often purchase legal insurance from the same providers directly. However, direct purchase premiums are usually higher than group premium rates given through your employer.
Costs of Employee Legal Insurance Plans
The cost of legal insurance to employees is generally structured as a payroll deduction. Under an employer sponsored plan, employees typically pay a monthly premium ($10-$50) to be enrolled. In cases where employees desire access to lawyers beyond the employment setting, such as for consultation or representation regarding marital, family law, landlord tenant or other personal legal issues, then legal insurance is a tremendous added benefit. Legal insurance can, for a low monthly premium, provide members a large network of legal professionals who can be accessed and used for any legal issue. Some legal insurance plans, such as Aflac, charge a monthly rate to employees which is then deducted from the employee’s paycheck, generally with the possibility of annual enrollment or opt-out.
Selecting a Legal Insurance Plan
When an employer provides legal insurance to their employees, they often offer a range of different plans. Employees should carefully consider the rates and coverage options available for each plan, as well as any restrictions that could affect access to services. Here are some factors to keep in mind when evaluating the options:
Coverage Limits
One of the most important considerations when evaluating a legal insurance plan is the extent of coverage offered. Every plan has a cap on the maximum amount it will pay out for different kinds of services. Some plans have extremely low caps and charge out-of-network fees for most services, while others provide comprehensive access. Employees should identify their primary needs and make sure that their plan provides support without forcing them to pay out of pocket.
Depending on the plan, only certain types of services may be covered. For example, for certain employees divorce services may be more important than estate planning. Most plans cover some type of divorce, but employees should confirm that their needs are covered by their specific legal insurance coverage.
Provider Networks
Many legal insurance plans have a network of participating attorney firms. Legal insurance plans will usually offer the best value if you use these network attorneys. However , accessing a network attorney may not be possible for employers with employees in rural communities or smaller cities. For example, say you run a factory in Omaha, Nebraska. The biggest city nearby has only one legal insurance provider who is competent to handle your employee’s case. If you live in New York City or Chicago it may be possible to find dozens of providers, but in rural America, finding a provider who is both in the plan’s network and has the expertise to take on your case may prove difficult. In that situation, you can end up losing thousands of dollars paying for services without legal insurance.
Employees seeking legal services should be sure to check whether the plan has a network close enough to meet their needs.
Exclusions and Covered Persons
Even the best policy will have exclusions and limits on access. For example, many policies do not cover family members of employees and will not pay if the employee files for divorce or an estate claim.
Employees should also be careful when choosing a legal insurance policy. Legal insurance will not cover legal needs you have before the policy starts. For example, if an employee is sued while the employer is considering legal insurance plans, that claim will not be covered. Often the attorneys who manage legal insurance claims can help employees manage "pre-existing" matters.
How to Use Your Legal Insurance
Making a claim on your legal insurance cover is very simple and falls into three stages. First you will need to check your employer has paid its premium to access cover (many employers only provide cover for a short period after your employment has started or after your probationary period has ended) before making a claim. If your employer has more than one legal insurance policy, you will need to work out which policy would apply to your circumstances.
Secondly you need to comply with the claims conditions that are set out in the policy. These can vary between policies, scheming organisations usually provide details on when, what and how claims can be made on their websites.
Lastly you will need to speak to either your in-house HR team or the person who administers the scheme and tell them you have a new legal matter that you want to claim under the scheme. They’ll then start working through the claim process with you.
Remember that the policy is there to protect you and that there are strict time limits within which claims under the policy must be made so don’t think that leaving it until next year is a good idea, it won’t be! Do also bear in mind that the scheme will probably cover legal fees incurred for a reasonable prospect of success.
The purpose of the policies are twofold. First they are designed to help employees deal with legal issues as they arise; however, the claim handling mechanism set in place by the employers often enables the scheme insurer to identify trends in disputes which can then be used to deal with problems before they escalate. This will include offering appropriate training and advice on issues experienced by multiple employees which might be costing the employer money and causing disruption. It’s important to remember you can only make a claim under the policy – a claim on behalf of colleagues won’t be covered.
It’s also worth noting that the typical schemes available do not cover the same types of legal risks – if you are ever in doubt as to whether an issue you are facing would be covered try calling your employment legal advice line. The advice line handbook or website may give you guidance on whether cover would be available.
In summary, you will be required to follow the internal claims procedures, concentrating on three things when making your claim:
How Legal Insurance Typically Works
When reviewing the fine print, limitations and exclusions in the policy terms can also temper the high expectations some employees may have about the scope of their coverage. Frequently, legal insurance policies provide for exclusions for pre-existing issues, such as will preparation or matters arising out of a relationship with a partner, spouse or former spouse where the initial consultation occurred prior to the effective date of the policy.
While an employer may be engaged in extensive policy education and communication with employees, employees’ understanding of the policy parameters is more likely to come from conversations with the plan adviser or claims administrator that is actually involved in distributing policy materials and answering questions than from an initial policy brochure distributed by the employer. By its nature, the policy documents will be more detailed and granular than the employee communications and the disclosures and disclaimers that accompany the purchase may not be so visible to employees. Thus, when setting up legal insurance, employers should expect employees to come to them with any concerns or questions, but also be prepared for employees to have misconceptions, which can be addressed through education and communication.
While some plans are very broad, much like group legal plans offered many years ago by employers, many of them contain provisions capping the reimbursement or the value of services provided under the plan. Leverage agreements allow legal service providers to be reimbursed for a limited number of services. For instance, an employee may be reimbursed $500 for a will and statutory powers of attorney document or an employer may offer free legal services under an aggregate cap of $10,000, of which employees can select specific services (e.g., wills, mortgage preparation, etc.). With these limits in mind, employers should analyze whether this type of program structure would make sense and what the up-front costs of a particular structure may be before offering it. The proceeds of the policy will often be deductible from an employer’s taxable income, but cash flow out of the company may not be reimbursable.
Finally, keep in mind that when the policy is administered by someone other than the employer and is offered through a pooled policy, terms and pricing may not be as flexible, depending on what the carrier offers. On the other hand, this type of program can take a lot of pressure off the employer in terms of program administration.
Common Questions About Legal Insurance
How portable is my plan?
An employee’s ability to port benefits depends on the particular policy(s) of coverage. Some plans include a provision whereby an employee will be able to port their legal benefit if they pay the annual premium of the plan. In most cases, the facility to port benefits is contingent on the employed remaining insured with their current employer and continuing activated coverage. If the employed has terminated their employment it is not guaranteed that they will be able to maintain their legal benefits. The minor costs associated with porting, which are typically required to continue to receive coverage, are a great incentive in that the insured remains entitled to access legal plans that their family member may not be able to obtain or may have to pay much larger premiums.
Can the plans be modified or changed?
Benefit modifications are almost always prohibited during the policy term. This is to ensure that the employee cannot change their plan whenever they feel like it. Employees must wait until their policy expires in order to purchase a different package . In some cases however, the employee may decide to get a new plan with different package variations from the same supplier and the extension of an existing plan rather than choose to port their benefit.
Why wouldn’t I just purchase a plan privately?
Employees tend to think about the cost of legal benefit plans relative to the cost of legal bills. The provided plans charge a nominal plan premium charged to the employer, either equally amongst the work force or at different cost levels depending on coverage. The premium is far less than the total amount of legal bills that a single employee could incur in one year. In many cases, employees do not consider the cost of a private plan to be a significant factor. The cost of a plan is an important factor and should be taken into consideration. Employees tend to find benefits in employer sponsored plans that would not be available to them in a privately purchased plan. For example, an employee with children may want to include their children under their plan cover. Many instructors/ operator plans only cover the individual. Employer sponsored plans can extend coverage to the family members of the employee, where other plans will not.